Area still mired in housing slump Building permits at lowest levels since '82 recession.

August 16, 1991|By Kevin Thomas | Kevin Thomas,Evening Sun Staff

Despite a rosy picture out of Washington yesterday on the pace of new housing construction nationally, Maryland and the Baltimore region appear to be facing one of the worse slumps in recent memory.

The Baltimore Regional Council of Governments, in a building permit report released yesterday, declared residential construction activity for the first six months of 1991 to be the lowest recorded in the area since the 1982 recession.

Moreover, the number of building permits issued between January and June 1991 declined 32 percent from last year's figures. Permits issued in the first six months of this year totaled 5,428, compared with 8,046 during the same period last year.

July figures, also released yesterday, showed the decline continuing but at a slower pace. The total number of permits issued in July for the region declined 9.7 percent from the

same month last year.

"This is alarming to a lot of people, especially developers," said Mark Goldstein, an analyst for the council of governments. "Obviously, if it continues for another year, we should all be alarmed."

Goldstein attributed most of the decline in activity to tighter lending policies within the banking industry, increases in unemployment and declines in personal income.

"Clearly, we are in a recession, and even if we are in a recovery phase, it isn't something that's taking off," he added.

Statewide, the free-fall in building permit activity nearly mirrors the local decline.

The U.S. Census Bureau's regional center in Suitland, which compiles statewide construction data, reported a 35.4 percent decline in the number of permits issued in the first half of 1991 compared with last year.

More than 21,100 building permits were issued in Maryland between January and June of 1990, but the figure dropped to 13,030 during the same period this year.

The disparity between the national and Maryland figures is largely due to differences in the way data are compiled and reported.

Yesterday, the Department of Commerce reported a 3.7 percent increase in housing starts in July compared with the previous month. The increase is the fourth consecutive monthly advance, the government said.

But the government's figures track only month-to-month changes and do not compare data collected over specific periods with statistics from the same period in previous years.

Month-to-month changes often reflect seasonal improvements. For instance, housing starts are generally expected to rise during the spring and summer months.

Also, the Commerce Department data is based on estimates of the number of building permits issued in each state, officials said. These estimates are combined with projections about the the number of homes that will start construction during those months.

The U.S. Census Bureau data, which is used to compile the Commerce Department report, is also based in part on projections.

The Baltimore Regional Council of Governments is apparently the only agency that collects building permit information for a specific region of the state. That data is based on actual building permits issued and, while more accurate, usually lags Commerce Department data by several weeks.

Data based on building permits issued is skewed to some extent because a permit does not represent actual construction but only intent. Some projects for which permits are issued take months to begin or are never constructed.

Still, the disparity that leads to upbeat reports from the Commerce Department is anticipated by those in the development community.

"The Commerce Department is in the business of creating commerce, not in providing a realistic assessment of what's going on," said Gary Blucher, president of Britannia Development Corp., a home-building firm in Owings Mills.

Blucher, who is vice president and treasurer of the Maryland Homebuilders Association, said that residential construction in the Baltimore area has been sporadic during the past six months, "but nothing like it used to be."

Having started his own company a year ago after the development firm he worked with previously filed for bankruptcy, Blucher said his only project at the moment is the Villages of Thomas Run, a 250-unit townhouse development in Harford County.

Unlike past slowdowns, which were caused by increases in interest rates, this is the first time, Blucher said, that he can remember a slump resulting primarily from a lack of consumer confidence.

"There's been so much talk of recession and layoffs that people are afraid to commit themselves," he said. "Nobody thinks their job is as secure as it used to be."

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